Agreed revisions to the India Cyprus Double Tax Treaty

Agreed revisions to the India Cyprus Double Tax Treaty

On 30 June 2016 the Double Tax Treaty between Cyprus and India has been revised. The treaty has for some time been the subject of negotiations between the two governments. The text for the treaty has been agreed and it contains a number of important provisions which we refer to briefly below.

An important result of these revisions Cyprus as a jurisdiction will no longer be “black listed.” As of 1st November 2013 will no longer be classified by the Indian authorities as a ‘Notified Jurisdictional Area.’ This status will however continue to be in effect until the revisions to the treaty come into force

The expectation is that the revised treaty will go through the appropriate procedures in both countries and be put into effect in the next few months.

The Revisions provide a grandfathering provision under which taxation at source for capital gains arising from the sale or disposal of shares will apply. However, investments carried out prior to 1st April 2017 and disposal of the shares in such investments will be taxed exclusively by the state in which the seller is resident.

We expect this will see a revised interest in the flow of investments via Cypriot Corporate entities into India where substantial advantages can be secured through thorough planning and corporate structuring.